While some see money as the root of all evil and others will argue it can’t buy happiness, author Henry David Thoreau says, ‘wealth is the ability to fully experience life.’ And in many ways, he’s right.
Love or loathe it, money gives you more freedom to do what you desire, especially in retirement. From travelling the globe to enjoying fine dining to living without the stress of financial burdens. Building a solid nest egg allows you to live the life you’ve always dreamed of.
But accumulating enough wealth to live comfortably in retirement isn’t something that just happens. It takes intentional effort to make your money grow and make the most of what you have.
We spoke with Matt Bradley from Griffin Financial Services to get his tips on making your money last in retirement.
One of the biggest misconceptions about money in retirement is that it's going to last. This is why you need a well-planned strategy to ensure you can keep enjoying your hard-earned cash for as long as you need to.
‘Start by asking yourself what you want your retirement to look like. It's a good idea to know your number. That’s the amount of money you'll need to live comfortably,’ Matt says. ‘Once you have that figure in mind, you can plan how to get there. And if you can't get there, you might work up a plan around that and alter your goals accordingly.’
‘It’s a good idea to speak to a professional, such as a financial adviser. They can point you in the right direction and give you options about how to get the best return from your money.’
Knowing your financial and lifestyle goals is invaluable for creating a map that can guide you to achieve them. ‘There are lots of little things you can do along the way. Like cutting back on things that aren't making you happy and concentrating on the things that do,’ he says. ‘Setting those goals and priorities is really important because, without them, you won't know where your money's at, making it much more difficult to save. It's a good idea to speak to a professional, such as a financial adviser. They can point you in the right direction and give you options about how to get the best return from your money.’
Superannuation is like a pot plant. If you metaphorically water it and look after it, it will flourish. But if you leave it in the dark without nourishment or attention, chances are it won't do as well. It's your money, so you must pay attention to your super investments.
‘When planning your financial future, look at all your assets and get a big picture of what you own,’ says Matt. ‘A large part of that is your super. People underestimate how valuable super can be. And don't always understand that it should be treated as an investment. But because your super account may have been set up decades ago, you might not think to reassess how it's invested and what the investment portfolio looks like now.’
‘People underestimate how valuable super can be. And don’t always understand that it should be treated as an investment.’
One of your priorities might be protecting your capital, so if the market drops, it won't be a problem for you. Matt suggests you look at how your super money is invested, and try to protect as much of it as possible from potential market downturns.
‘Insider super, for example, allows you to invest in income-producing assets as well as capital growth. This means you also have assets that are lower risk but can also give you an income.’
Let's face it. Tax can be taxing. But there are strategies you can use to help you be more tax effective. For example, you might not realise that superannuation is a tax-effective way of building wealth in retirement. Because you're taxed significantly lower inside of super than outside of it. (Which means more money in your pocket than the government’s).
‘Any growth inside your super is taxed at up to 15%, which could be more than half of what you might pay if you held shares outside of super,’ says Matt. ‘So you see, there are clear tax savings to be made.’
‘You might not realise that superannuation is a tax-effective way of building wealth in retirement… just make sure you speak to your financial planner for specific advice.’
And when you turn 60, there's another tax-free reason to celebrate. ‘If you convert your super into a pension at the magic age of 60, you enter a zero tax environment,’ Bradley explains, ‘So the money you pull out of your pension is tax-free, as is any investment growth within it. Just make sure you speak to your financial planner for specific advice first.’
There are many financial products on the market. Some might suit you, and others might not. Some come with high risk and higher returns, while others take a more gentle approach.
Speaking to a professional, who understands all the options, can help you tailor a plan to make your money work as hard for you as possible.
‘I think it's important to bear in mind the importance of diversification within your investment portfolios,’ says Matt. ‘While you can move your assets into areas that are safer, like bonds, fixed interest or cash, it's possible in the current market you won't get as much of a return.’
The key is to balance income vs growth and savings vs life satisfaction.
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